A Sunoco gas pump reading shows more than $54 as a man pumps gas. Gas prices continue to rise.
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An economic recession is imminent if oil surges to $140 per barrel, according to DataTrek.
Oil prices could continue to see upside pressure and hit $130 per barrel as peak summer travel nears.
“Any time since 1970 when oil prices have [doubled] in a year a recession has followed in the next 12-18 months,” DataTrek said.
A 17% surge in oil prices is all that’s needed to spark an economic recession in the US over the next 12-18 months, according to DataTrek Research co-founder Nicholas Colas.
Colas highlighted in a Tuesday note that “any time since 1970 when oil prices have gone up 2x in a year a recession has followed in the next 12-18 months.” That level would be reached if WTI crude oil jumped to $140 per barrel, which is around the same level oil prices hit at their peak in 2008.
“We still believe $140/barrel is the level to watch as a recession indicator,” Colas said, highlighting that it would represent a double from last summer’s $70 per barrel oil price. In other words, the cure for high oil prices is, high oil prices, as pain at the pump for a sustained period of time often leads to demand destruction as consumers tighten their financial belts.
Colas expects oil prices to continue to trend higher as peak gasoline demand is still a month away, which tends to be marked by the July 4th weekend as millions of Americans travel and cool themselves down to escape the summer heat. Colas believes that would be a practical time for oil prices to peak, saying “let’s hope it does so with a $130-handle rather than anything higher.”
While oil prices continue to hover around $120 per barrel, supply pressures could start to ease in the coming months as US oil giants like Chevron signal that they will boost their oil production in the Permian Basin, and as OPEC members begin to increase their daily oil output.
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Source:: Business Insider